Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What entertainment costs should be reported to HMRC?
If you are an employer and you cover any costs relating to providing entertainment of your clients, you need to inform HMRC of these expenses and there might be additional tax and National Insurance to pay.
As far as HMRC are concerned, entertainment can involve eating, drinking and other types of hospitality that you provide or cover the costs for. It can be split into the following two categories:
- Business entertainment of clients, so this might involve picking up the costs arising from making a new business connection or bidding for a particular business project.
- Non-business entertainment of clients, which would involve entertaining a business connection for social purposes rather than for a specific business reason.
What do you need to report and pay to HMRC?
What you need to report and what you have to pay depends on the nature of the entertainment and who was responsible for arranging and paying for it.
Business entertainment of clients
For this category of entertainment, the same rules apply no matter who arranges and pays for the entertainment. So, whether you arranged and paid for the entertainment directly, whether your employee arranged it and you paid for it or whether you reimbursed your employee’s entertainment costs, you have to report the cost on your P11D form. There is no impact on tax or National Insurance in these instances. Some of these expenses will be covered by exemptions (formerly known as dispensations) which means that you don’t need to include them in any end-of-year reporting to HMRC.
Non-business entertainment arranged and paid for by you
In these situations, you need to report the cost on your P11D and pay Class 1A National Insurance on the cost of the entertainment you paid for.
Non-business entertainment arranged by your employee but paid for by you
In such circumstances, you will need to report this on your P11D and the full cost of the entertainment should be added to your employee’s earnings and Class 1 National Insurance deducted through payroll. PAYE tax isn’t payable on these expenses though.
Non-business entertainment arranged and paid by the employee and reimbursed by you
In such circumstances, you don’t need to report this on your P11D and instead the full cost of the entertainment should be added to your employee’s earnings and PAYE and Class 1 National Insurance deducted through payroll.
How should you complete your P11D?
When filling in your P11D form, there is a tick box related to entertainment. This is used by HMRC to see whether or not your employee will be able to claim a tax deduction for any entertainment expenses you might have provided. If you are completing this box on behalf of a charity or a tonnage tax company, you don’t need to enter anything in this box. Otherwise, you need to tick the box if you will be disallowing the cost of the entertainment in your business’s tax calculations or cross the box if it won’t be disallowed.
If entertainment costs form part of a salary sacrifice arrangement and the amount of salary given up is greater than the cost of the entertainment, you need to report the salary amount to HMRC instead. This only applies to salary sacrifice arrangements made after 6th April 2017.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.